AROUND THE KORNER WITH OIL AND GAS PRICING
World Oil Prices Higher Despite U.S. Weekly Stocks Rise
Oil prices extended recent gains on Wednesday, despite an unexpected inventory increase in the huge U.S. market.
World benchmark Brent Blend crude closed seven cents up at $14.68 a barrel on London's International Petroleum Exchange.
The American Petroleum Institute (API) issued its latest weekly U.S. inventory figures late on Tuesday which showed a much larger than anticipated build-up in crude and heating oil stocks.
The figures, which are often used as a short-term indicator of demand in the world's largest energy consuming nation, were disappointing for dealers who had bet on a decline in stocks following supply disruptions caused by Hurricane Georges.
However, compared with a year ago, crude oil stocks have fallen, suggesting to one broker that ''we are not seeing so much crude into the United States as you would expect'' even when there are no closures of U.S. Gulf ports.
''The market is holding because what you see in the physical balance is not as out of kilter as people thought,'' said Michael Rothman, senior energy analyst at Merrill Lynch in New York.
He added that a meeting of the oil ministers of OPEC giants Saudi Arabia and Venezuela and non-OPEC Mexico on Friday was not expected to produce concrete measures to tackle prices, which are still some $5 below the 1997 average.
The three ministers were expected to discuss the likely course of oil prices next year after jointly orchestrating two rounds of cuts to world crude supply.
The market has recovered some $3 a barrel after the second round of cuts came into effect in July, taking out some 3.0 million barrels per day (bpd) from the market with Organisation of the Petroleum Exporting Countries members contributing 2.6 million bpd of the total.
But some danger signals remained. Royal Dutch/Shell Group on Tuesday signalled its intention to cut back operations at its European refineries if the market for refined products did not improve.
A few other European refiners were also said to be considering reducing runs, a move which would dampen demand for crude oil.
''We're monitoring refinery margins on a daily basis and it's for sure that they've been badly hit, mainly with strong crude prices, mainly Dated Brent,'' the official said. Prices in dollars per barrel:
......................................................Sept 30......Sept 29
.........................................................(close)......(close)
IPE November Brent........................ 14.68....... 14.61
NYMEX November light crude........ 16.16....... 15.98
Asia Crude Market Boosted By Bass Strait Shut In
A shutdown in Australia's Bass Strait oil and gas field has provided the Asian crude market with a much needed boost, traders said on Thursday.
Shell Australia (quote from Yahoo! UK & Ireland: SHEL.L) and Mobil Refining Australia (NYSE:MOB - news) refineries have been buying prompt crude cargoes to cover for the loss of feedstock from the 200,000 barrels-per-day (bpd) Bass Strait field.
The price of benchmark Tapis, off which most Australian grades are prices, has risen sharply this week owing to the sudden prompt demand.
And some traders said prices will remain bouyant because there were now few cargoes available to Shell and Mobil to cover any potential needs in the next two weeks or so.
Traders said that since Friday, at least one October loading 450,000-barrel cargo of light sweet Malaysian Tapis and three October and November cargoes of Cossack had been sold in total to the two refiners.
They said that up to 500,000 barrels of October Minas had also been sold to Shell's 435,000-bpd refinery in Singapore, to replace cargoes diverted to Australia.
Shell declined to confirm the trades and Mobil was unavailable for immediate comment.
''The market has definitely been supported on the back of Bass Strait, but it all hangs on how long the shutdown will last,'' one trader in Australia said.
On Friday, Bass Strait operator Esso Australia, a unit of Exxon Corp (NYSE:XON) announced a shutdown at the Bass Strait field, following a blast at a gas processing plant in Victoria.
The field produces about 40 percent of Australian crude output and most oil production is piped directly to Shell's 110,000-bpd Geelong refinery and Mobil's 130,000 bpd Altona complex.
Exxon said on Tuesday it aimed to bring the gas production back up by the end of next week. The company said previously that it would resume crude production only after gas production had restarted.
The incremental demand that emerged following the shutdown pushed prices of Asian crudes higher.
The Tapis cargo was sold at parity to its Asian Petroleum Price Index (APPI), compared to an offer on the cargo in the previous week of APPI minus 20 cents.
In September, Tapis was discussed at APPI minus 50 cents.
Tapis sellers are now seeking a premium of 20-25 cents over APPI for their November cargoes.
The Cossack cargoes sold were at Tapis APPI minus 60 cents per barrel, firmer than a trade done early last week of APPI minus 75 cents.
Traders said the shutdown would mean Shell and Mobil would need to divert crudes it already had in hand to Geelong and Altona from refineries elsewhere in Asia.
''The problem for them is getting crude for immediate processing, as in now to the next 15 days,'' said a trader in Australia.
''There is not enough crude out there to cover the very short-term, so all they can do is to optimise what they already have,'' he said.
Neither Shell or Mobil's refineries have large storage capacity because most of their crude is received by pipeline, traders said.
The Shell and Mobil refineries elsewhere in Asia that are diverting crude to Australia were likely to need to cover their own shortfall by buying further out, adding another layer of demand to the Asian market, traders said.
Traders said that difficulties in rearranging deliveries to meet the two refineries' very prompt requirements could lead to run cuts in the very short-term period.
But a spokesman at Shell Geelong told Reuters that it had adequate supplies, so it was unlikely to cut runs in the next fortnight.
''We are comfortable in the next two weeks, we don't see any problems,'' he said.
''We have our Sydney refineries, we have diverted some prompt and we're quite happy with the supply situation at the moment,'' he said
Mobil said on Monday it was diverting a cargo of Griffin crude from its Adelaide refinery to Altona.
A Mobil spokesman also said runs at Altona would be reduced following a reformer maintenance scheduled to start next Saturday.
U.S. ACCESS Crude, Gasoline Futures Edge Up
U.S. crude oil and unleaded gasoline futures edged up Wednesday in thin after-hours trade as buying continued from the daytime session, traders said.
Traders said no fresh news came into markets, which traded lightly following a late rally in the New York Mercantile Exchange (NYMEX) session.
''There's not much going on,'' a trader said. ''It's a continuation of what we saw today.''.
Prices on after-hours ACCESS rose because cheaper crude oil prompted buying, dealers said. Buyers had stepped up on NYMEX to take advantage of the November contract after it dropped 20 cents a barrel earlier in the day.
The drop came after the weekly American Petroleum Institute (API) report on Tuesday showed the first rise in crude oil stocks since August and a continuing build of heating oil stocks.
Several hours into the ACCESS session the November crude oil futures rose four cents a barrel to $16.18 after closing 16 cents higher at $16.14 in the regular NYMEX session.
Total crude oil volume was 395 lots, of which 262 were November contracts.
The November unleaded gasoline contract also gained from its daytime settlement, rising 0.12 cents to 47.30 cents after closing 0.84 cents higher at 47.18 on NYMEX.
By contrast, the November heating oil contract slipped 0.05 cents a gallon to 43.35 cents after closing up 0.08 cent at 43.40 on NYMEX.
NYMEX Natural Gas Ends Up, Then ACCESS Gains After AGAs
NYMEX Hub natural gas futures, buoyed by technicalbuying and lingering concerns about damages from Hurricane Georges, ended higher Wednesday, then gained more on ACCESS after a supportive weekly inventory report.
In the day session, November climbed 8.6 cents to close at $2.433 per million British thermal units after trading between $2.36 and $2.48. Then on ACCESS, November traded in the $2.475-2.495 range shortly after the AGA storage report. December settled seven cents higher at $2.625. Other deferreds ended flat to up 5.3 cents.
''It's (the AGA report) looking a little bullish, and next week, it should be light again because of all the cuts this week from Georges. It should be good for gas prices (near-term),'' said one Midwest trader.
AGA said Wednesday U.S. gas stocks rose last week by 41 bcf to 90 percent of capacity, well below Reuter poll estimates in the 50-60 bcf range. Overall storage slipped to 314 bcf, or 12 percent, over a year ago.
Eastern inventories gained 30 bcf and were six percent above last year. Consuming region west storage, which climbed four bcf for the week, was up 12 percent from 1997 levels. Stocks in the producing region rose 7 bcf and stood 27 percent over year-ago.
Traders said the market was buoyed all day by concerns about the aftereffects of the storm, particularly gas processing plants that may have been flooded by torential rains and tidal surges.
Late Wednesday, Dynegy said two of its natural gas processing plants in southeast Louisiana were shut Saturday due to Hurricane Georges and will remain down at least through the week. The two plants have a combined processing capacity of 2.2 bcfd, but traders said most of the gas could be rerouted and only 500-600 mmcfd would likely be shut in.
But with storage nearing capacity, most Gulf gas flows returning and no other reports of problems, some expected the rally to be short-lived.
Thus far, gas pipelines have not reported any significant damage to their systems, and a number have reported flows are on the rise and should be back to normal in the next day or so.
Transco said it expected all 1.8 bcfd of Gulf gas cut by producers this week because of Georges to be restored later today. Trunkline said most of the 800 mmcfd shut in Monday was back. Columbia said 850 mmcfd cut from its system this week had been restored. In addition, ANR said another 410 mmcfd was back on two of its systems, and Texas Eastern and Sonat also reported gains.
WSC expects above-normal eastern temperatures at midweek to to cool to several degrees F below normal by Friday through Sunday. Midwest readings are expected to dip to below normal Thurday and Friday, then warm to two to four degrees above normal by the weekend. Texas will range from four to 12 degrees above normal for the period, while the Southwest will see readings on either side of normal.
Chartists noted November, which broke trendline and range support Monday, held yesterday above the 18-day moving average and above Monday's low, which likely made some shorts nervous.
November support was pegged at the recent $2.27 low, with further buying expected in the $2.22-2.23 area, and then around $2.10. Resistance was seen at the $2.57 and $2.605 recent highs.
In the cash Wednesday, Henry Hub swing quotes jumped more than 15 cents to the low-$2.20s. Midwest pipes were almost 20 cents higher at about $2.10. Gas at the Chicago city gate was up more than 20 cents to the low-$2.30s, while New York rallied 20-25 cents to the mid-$2.40s despite mild weather and almost no load in the region. In the West, El Paso Permian was talked in the low-$2s, also up about 20 cents.
The NYMEX 12-month Henry Hub strip gained 2.7 cents to $2.329. NYMEX said an estimated 54,452 Hub contracts traded today, up from Tuesday's revised tally of 33,409.
U.S. Spot NatGas Prices Jump On Storm Damage Fears
U.S. spot natural gas prices for early October firmed sharply Wednesday amid lingering concerns about damage from Hurricane Georges though none had been reported yet, industry sources said.
While gas production in the Gulf of Mexico continued to return to the market today following shut ins earlier this week from Hurricane Georges, traders said rumors swirled that the restart of some processing plants may be hampered by flooding.
''There's (concern about) the storm problems, and there's the spread between the cash and November futures. If you have any room in storage, you have to be buying like crazy,'' said one Midwest trader, referring to the more than 20-cent futures premium to cash that also helped firm physical prices today.
Swing gas at Henry Hub jumped almost 20 cents to the low-$2.20s per mmBtu, up about 60 cents from the Sept index.
But despite concerns about early-month supplies, traders noted pipelines, thus far, have not reported any significant damage to their systems, and a number have reported flows are on the rise and should be back to normal in the next day or so.
Transco said it expected all 1.8 bcfd of Gulf gas cut by producers this week because of the storm to be restored later today. Trunkline said most of the 800 mmcfd shut in Monday already was back. Columbia said 850 mmcfd cut from its system this week had been restored. In addition, ANR said another 410 mmcfd was back on two of its systems, and Texas Eastern and Sonat also reported gains.
Midcontinent pipes also saw sharp gains, with swing quotes on Panhandle at about the $2.10 level, up almost 20 cents on the day and more than 50 cents from Sept 1 levels. Gas at the Chicago city gate was talked in the low-$2.30s, up more than 20 cents.
In west Texas, Permian prices firmed to the low-$2s, up just over 20 cents from yesterday's levels. San Juan gas gained 15 cents to the low-$1.80s.
On the East Coast, New York city gate quotes jumped 25 cents to the mid-$2.40s despite mild weather and almost no load in the region.
Many traders said they expected ample storage and fading autumn demand to soon pressure the market.
A Reuters poll showed most expected a weekly AGA stock build in the 50-60 bcf range when the report is released later today. For the same week last year, stocks gained 87 bcf.
Canadian Spot Natural Gas Prices Up On Capacity Concerns, NYMEX
Canadian spot natural gas prices rose on Wednesday amid an upswing in NYMEX pricing and news that there will be less winter pipeline capacity in Alberta than expected, industry sources said.
NYMEX tracked up partially on rumors of damage to facilities in Louisiana in the wake of Hurricane Georges, marketers said.
At the same time, NOVA Gas Transmission announced a cutback of 200 million cubic feet a day on its intra-Alberta system's winter pipeline capacity estimate, to 12.9 billion cubic feet a day from 13.1 billion.
''That shocked the market a little,'' one Calgary-based marketer said.
Day prices at the AECO storage hub were volatile, ranging from C$2.30 per gigajoule to C$2.70 before settling at the C$2.50/2.55 per GJ level.
The October contract was discussed at C$2.47/2.50 per GJ.
At Westcoast Energy's Station 2 compressor, prices increased by about 23 cents per GJ from Tuesday to C$2.47/2.50.
Trade at the Sumas/Huntingdon export point was talked at US$1.75/1.80 per million British thermal units, up about 18 cents.
Meanwhile, Kingsgate day prices were up almost 25 cents over Tuesday, to US$1.80/1.83 per mmBtu.
To the east, Niagara business for the day increased about 10 cents, to US$2.30 per mmBtu.
This A.M., NYMEX Hub NatGas Called Higher With ACCESS, AGAs
NYMEX Hub natgas futures were expected to open seven to eight cents higher Thursday, helped by a firmer ACCESS session after a bullish weekly inventory report and news late Wednesday that two Louisiana gas processing plants would remain shut this week in the aftermath of Hurricane Georges.
November over-the-counter trade ranged this morning from $2.50 to $2.52 per mmBtu after settling 8.6 cents higher Wednesday at $2.433. On ACCESS, November last traded up 8.2 cents at $2.515.
Early cash quotes at the Hub were in the $2.35-2.38 range, up about 15 cents from yesterday's average, traders noted.
''The market is reacting to the AGAs and the uncertainty about the gas plants, and the funds are starting to get long,'' said one Midwest trader, noting there seemed to be a ''short squeeze'' at the Hub early this morning.
AGA said Wednesday U.S. gas stocks rose last week by 41 bcf to 90 percent of capacity, well below Reuter poll estimates in the 50-60 bcf range. Overall storage slipped to 314 bcf, or 12 percent, over a year ago.
To get storage to 3.1 trillion cubic feet by Oct 31, weekly injections of about 46 bcf are needed.
Eastern inventories gained 30 bcf and were six percent above last year. Consuming region west storage, which climbed four bcf for the week, was up 12 percent from 1997 levels. Stocks in the producing region rose 7 bcf and stood 27 percent over year-ago.
Traders said the market has been buoyed this week by concerns about the aftereffects of Hurricane Georges, particularly on gas processing plants that may have been flooded by torrential rains and tidal surges that stretched from eastern Louisiana to the Florida Panhandle.
In the news late Wednesday, Dynegy said two of its natural gas processing plants in southeast Louisiana were shut Saturday due to Hurricane Georges and will remain down at least through the week. The two plants have a combined processing capacity of 2.2 bcfd, but traders said most of the gas would be rerouted and only 500-600 mmcfd would likely be shut in.
And with storage nearing capacity, most Gulf gas flows returning and no other reports of problems from the storm, some expected the rally to be short-lived.
Thus far, gas pipelines have not reported any significant damage to their systems, and a number have reported flows are on the rise and should be back to normal today or tomorrow.
Transco said yesterday it expected all 1.8 bcfd of Gulf gas cut by producers this week because of Georges to be restored late Wednesday. Trunkline said most of the 800 mmcfd shut in Monday was back. Columbia said 850 mmcfd cut from its system this week had been restored. In addition, ANR said another 410 mmcfd was back on two of its systems, and Texas Eastern and Sonat also reported gains.
WSC expects above-normal eastern temperatures Thursday to cool to three to 10 degrees F below normal Friday through Sunday, then warm to normal levels by Monday. Midwest readings will slide to four to 12 degrees below normal Thurday and Friday, then warm to three to eight degrees above normal by Monday. Texas will range from normal to slightly below Thursday through Saturday to three to six degrees above normal Sunday and Monday. The Southwest will see mostly below normal readings for the period.
Chartists noted November broke trendline and range support early this week, then held the 18-day moving average and Monday's low and rebounded, making shorts nervous despite the longer term bearish fundamentals.
November resistance was seen at the $2.57 and $2.605 recent highs. Support was pegged at the recent low and double bottom at $2.27, with further buying expected in the $2.22-2.23 area, and then around $2.10. |
